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Legal action could force porn users to pay

FULLY DOWNLOADED: Christopher Walken and Ray Stevenson in the film Kill the Irishman.

If there's one thing Matthew Clapham loves more than money and porn, it's privacy. The 33-year-old New Zealander lives in the exclusive Clear Island Waters canal estate on the Gold Coast, in a six-bedroom waterfront mansion he bought in May 2007 for A$1.75 million.

On Google Earth you can see a satellite image of the house's roof and the appealing spit of artificially sculpted land on which it sits, but you can't see the house on Google's street view because it sits behind the heavy wrought-iron barriers of a gated community, which no prying camera car penetrate.

What goes on inside the house is equally off limits, though this much is known: it is the registered address of a business called Movie Rights Group, whose directors are New Zealand-born brothers Matthew Wade Clapham and 38-year-old Richard Dean Clapham. Neither is on the Australian electoral roll or in the phone book, and the company does not list their names or publish a contact number on its website.

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Movie Rights Group was registered in November 2010 but only came to public notice this month when the CEO of an Australian internet service provider mentioned on his blog the first step in a legal action that could have massive ramifications.

John Linton, boss of Exetel, wrote on October 1 that a Brisbane law firm acting on behalf of Movie Rights Group had written to him requesting the account details of 150 customers who had allegedly downloaded the movie Kill The Irishman in May. The firm had also written to other ISPs, including Telstra, iiNet and Internode; in total, Linton wrote, Movie Rights Group had a target list of about 9000 Australian IP addresses.

"The most interesting thing I found in their approach," Linton continued, "was their request for IP records going back 12 months or more. This would allow them to issue one subpoena ... that covers 12 months-plus of illegal downloading and thus allow them to take action against tens or hundreds of thousands of end users at a time on an ongoing basis."

If Linton's hunch is correct, that could spell bad news for the vast number who have downloaded or uploaded movies such as Kill The Irishman via torrent-streaming sites in the past year. But is that really what Movie Rights Group has in mind?

The Age has traced the lineage of Movie Rights Group and Lightning Entertainment, and the connections of the Clapham brothers to a vast international web of pornographic websites, and concluded that there is a strong chance this action is in fact a stalking horse for a wider campaign against copyright breaches on behalf of the porn industry.

Although not familiar with the precise details of the case, it's a scenario that Sarah Cameron, intellectual property lawyer at MDP McDonald Partners, can see unfolding. "Once a legal precedent has been set allowing the owner of copyright in a mainstream film to access personal information about a large, anonymous group, that same precedent will then apply to owners of copyright in less mainstream works, including porn," she says.

The law firm acting on behalf of Movie Rights Group is Lloyds Solicitors, whose retired founder Russell Lloyd and current principal Teresa Lloyd have previously worked in New Zealand.

This small firm is based in the Brisbane suburb of Spring Hill and on its website claims expertise in "loan agreements and mortgages", "estate planning" and "business sales and purchases" - bread-and-butter stuff for a suburban law firm.

In Australia, the primary representative of the film and television industry in such matters is the Australian Federation Against Copyright Theft, which to date has generally preferred to take an educational approach around the cost of piracy rather than to pursue litigation.

It has been quick to distance itself from the Movie Rights Group action. "AFACT has no links or association with the Movie Rights Group nor would we consider utilising their services," says executive director Neil Gane.

"However, we recognise that content owners have the legal authority to exercise their rights to prevent online copyright infringement."

As yet, media reports have linked Movie Rights Group only with Lightning Entertainment. On its website the Los Angeles-based distributor of Kill The Irishman, a hard-edged crime thriller set in 1970s Cleveland, claims it specialises in independent movies. Though its titles lean heavily towards horror, Lightning is also the US distributor of the Australian films Hey Hey It's Esther Blueberger, You and Your Stupid Mate and Kenny.

What its website does not reveal, however, is that Lightning Entertainment is also a subsidiary of New Frontier Media, a publicly listed Colorado-based company with significant interests in pornography.

The parent company's 2011 annual report reveals that it derived 74 per cent of its near A$50 million revenue last financial year from "transactional television" services. The report defines the segment thus: "The transactional television business distributes branded adult entertainment ... through electronic distribution platforms including cable television and [satellite] operators." In other words, pay-per-view and subscription pornography.

The annual report goes on to identify the major threats to its business model, chief among them "less expensive alternatives such as low-cost and free internet websites".

It is no secret that the mainstream entertainment industry has struggled to cope with the threat of digital piracy. In America, the cost to the film industry alone of illegal downloading/uploading has been estimated at more than $6 billion a year.

But the porn industry is perhaps even more exposed, with the very medium that has fuelled its boom also threatening its survival - in terms of profit, if not popularity.

The internet drove the massive expansion of the porn industry (and vice versa), delivering explicit movies to the client's computer, with none of the shame associated with walking into a sex shop. But in recent years it has also allowed for the proliferation of amateur porn, free sites and hacked access to paid-content adult entertainment channels. As a result, the subscription and pay-per-view business models on which the industry's success were built are under serious attack.

In the US, the industry has responded with legal action - or with the threat of legal action, to be precise. As The Seattle Weekly reported in August, since the beginning of 2011 94,000 Americans have been sued for allegedly downloading porn without paying for it. But, the magazine added, "tellingly, not a single case has ever been decided by a jury".

The standard line of approach goes something like this: an individual who is accused of downloading porn illegally (i.e. without paying for content that normally demands a fee) receives a letter of demand from a law firm acting for the porn content's copyright holder. This letter typically suggests that if the case were to go to court, the alleged downloader could, if found guilty, face fines of up to $150,000, plus costs.

Alternatively, the letter continues, the case could be settled immediately for a small fee - generally just a few thousand dollars.

The financial risk coupled with the potential embarrassment of being exposed as a user of porn is apparently enough to convince many of the accused - and even some of those who insist upon their innocence - to settle.

A similar tactic has been employed in Britain, where the firm ACS:Law reportedly issued 25,000 letters of demand before its demise earlier this year. The approach was denounced in the House of Lords as "straightforward legal blackmail", but it had considerable success. According to some estimates, as many as 40 per cent of people threatened with legal action in Britain settled, typically for around £500 each.

In Australia, no letters of demand have yet been issued, but the Movie Rights Group action suggests it could be only a matter of time.

"In my opinion they could be testing the waters to see what the media, political and public response is," says digital forensics expert Grame Thompson, a consultant to state and federal governments and police agencies. "Presumably they're also doing it because they want to make a lot of money. Porn could well be next." Certainly, it has echoes of an approach that Robyn Ayres, executive director of the Arts Law Centre, has seen in other areas of alleged copyright infringement. "It's a business model, a scattergun approach, where they just try to extract what they can," she says. "It's really problematic if there's no real intention of pursuing the infringements in court, though that is of course difficult to prove."

If it is indeed their intention, the Clapham brothers would be well placed to lead an assault on porn pirates. Although little known, they are major players in the internet porn industry through their companies Internet Media Productions and Hyperfocus Media - both of which are registered to Matthew's Gold Coast home - and a string of associated entities based overseas.

The brothers' involvement with porn dates back to the late 1990s when their New Zealand company C.M.R. Productions - trading as Cosmo Media Online - hosted websites such as passwordhq.com, which promised customers access to paid-content porn sites via "hacked" passwords. They appear to have divested most of those domain names, though they still control wildpass.com, through an entity called Callstar Enterprises, which is based in Cyprus.

According to one former employee of the brothers, much of their operation relocated to Cyprus some years ago. "They basically moved it there to avoid scrutiny," the former employee said.

"In fact, they moved the operations to London then back to Australia and then to Cyprus."

An information page for Callstar reveals it to be the parent of 68 pornographic sites with clear connections to the Claphams or parties closely associated with them. A second company, Marson Investments, is the parent of another 49.

A third company, Ramson Productions, with an address in Kings Cross, London, is the parent entity for a number of "customer support" operations, to which customers' billing inquiries are directed. These sites show no signs of being associated with the porn industry, featuring bland text, respectable corporate imagery and photos of smiling and fully clothed call-centre workers. However, their registration details ultimately link them to the Cyprus operations of the Claphams and their associates.

The brothers themselves have so far kept a very low profile, and seemingly wish to keep it that way. When contacted by The Age for this story, Teresa Lloyd said "absolutely no comment". Matthew Clapham simply hung up. Lightning Entertainment promised a response from Los Angeles via its legal counsel, but after a week and follow-up approaches by The Age had provided none.

There is nothing illegal about the internet porn operations of the Claphams, as far as The Age has found. However, West Australian women's studies academic Abigail Bray wrote in August 2009 about a site that may have crossed the line.

Passed Out Pussy was a channel within a larger porn hub that Bray claimed was operated by the Clapham brothers' Ramson Productions and Internet Media Productions. (The site appears to be no longer active.)

"Welcome to the nastiest adult site on the net," the text on the home page began. "Our speciality is young girls drunk or drugged before they are brutally abused!!"

The site took care to note that "all models depicted are at least 18 years old", but then issued what reads a lot like an incitement to rape. "Some guys help a girl home when she has had to [sic] much to drink. We say, call your friends, bring out the camera and then take turns to f### that drunk slut to a pulp!!"

Bray was unaware of the site's Australian connection, but she told The Age she had reported it to the Internet Industry Association, which informed her that the matter was in the domain of the Australian Communications and Media Authority. She says she then reported it to ACMA, as directed. ACMA in turn told her that such matters would generally be referred to the Australian Federal Police, "but failed to mention if they had done so in this case".

ACMA has told The Age that the site in question was investigated and found to be likely to contain prohibited material, but because it was not hosted in Australia the matter was referred to international body Family Friendly Filters, "in accordance with legislation and registered industry codes of practice".

The Australian Federal Police has no record of an investigation into the matter. In fact, the Claphams appear to have been extraordinarily successful in flying beneath the radar. Queensland Police appears never to have had any reason to look at them or any of their activities either. Nor is there any public record of them coming to the attention of authorities in New Zealand.

Whether or not the Clapham brothers have plans to launch a US-style campaign against people who have illegally downloaded porn in Australia, there is a certain irony in the legal action they have launched through Movie Rights Group on behalf of Kill The Irishman.

For years, they have profited handsomely from the murkier side of the entertainment industry without ever drawing much attention to themselves. It is only now that they have assumed the guise of staunch defenders of the mainstream film business that we even know they exist.

19

I think this is very rich coming from the Clapham brothers! I know them personally, and know when they started here in Christchurch they used pirated web design software to make their websites, they used to download pirated games and movies themselves and they stole all the content for their adult sites and then charged people to access makeing so much money they left NZ for tax reasons.

Steve
#18
02:27 am Oct 19 2011

You should do a follow up on what actually happened to ACS:Law, it's pretty funny. There are basic details on Wikipedia.

I would imagine that these smut peddlers want to keep a very low profile to avoid such retribution.

Jack
#17
01:54 am Oct 19 2011

@David. The difference here is that the illegal downloaders are actually doing something illegal. The Clapham brothers haven't.
It's the governments job to enforce the law, and if they aren't, then it shouldn't be a law at all.
Either some charges need to be laid, or laws concerning internet downloads need to be looked at.

Laurence
#16
01:26 am Oct 19 2011

Anyone who used those password sites would know that they were just advertisements to paysites. In the very very early days, yes they had one or two, but after a short time, the security on the sites improved, and the paysite operators were paying bloody good money to put links to their "password" sites. Don't really see why this is news, if you're downloading illegally, you should prepare to get caught. Same with burglary, theft and any other kind of offence.

B
#15
12:45 am Oct 19 2011

If they tried this in NZ each request would cost them $25 and they would have to make 3 of them over a period of about 4 months per IP before the Copyright Tribunal would need to be involved and details possibly given out.

When that happened I hope they would be taking a good look at the detection methodology that was used.

This is actually a positive outcome of the 3 strikes law - shakedown protection

Philip Lamb
#14
09:59 pm Oct 18 2011

This is the classic legal-threats shakedown which is occurring in every country which has enacted new-generation copyright laws (similar to the US DMCA) which allow copyright holders to request personal details from Internet Service Providers of arbitrary IP addresses. Entities such as Movie Rights Group make thousands of requests and threats, knowing very well that not one of the cases will ever be tested in court, and as long as a fair percentage pay up, its profit profit profit. For what its worth, the fact that your IP address was in a torrent swarm is not sufficient proof in court of copyright infringement.

The actions of similar shysters in the UK where thousands of innocent people were receiving these letters lead to the formation of a group who have written a manual on how to respond to the threats. See http://beingthreatened.yolasite.com/. Much of the content applies also to Australia and New Zealand as well.

jimi
#13
via mobile 09:48 pm Oct 18 2011

last year when someone hacked into acs laws account and listed all the ip address of the people they were trying to fine then they posted it on the Internet. all the Internet prodivers got into trouble for handing over private information and acs law was closed.

gray
#12
08:06 pm Oct 18 2011

Our government passes laws that make crminals out of its own people --why? So now businesses have another way to screw ordinary people. why doesn't the government tell businesses who want to protect their copyright TO GET A BETTER BUSINESS MODEL! its becaue the governemt is lame and weak. why cant they make their service better value for money? I'd much rather download legally if I knew I was getting guranteed quality and value for money.

Mike
#11
via mobile 06:54 pm Oct 18 2011

Anything to make a quick buck.

I was targetted by ACS:Law in England last year, asking me to pay up £1000 and avoid going to court and receiving a £10,000 fine. They use porn purely because most people want to avoid the embarrassment of people (ie wives) knowing they may have downloaded anything suspect.
It was pure money making by numbers in Britain. I think about £10m in settlement letters were sent out, so if 10% paid they have made an easy million.
All a bit sad really.